Court File and Parties
COURT FILE NO.: CV-21-00002006-0000 DATE: 2022-04-25 SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Royal Bank of Canada, Plaintiff AND: Errol O. Calloo also known as Errol Calloo and Nessa Stephens, Defendants
BEFORE: M.L. Edwards, Regional Senior Justice
COUNSEL: Gregory W. Bowden, Counsel, for the Plaintiff Errol O. Calloo and Nessa Stephens, self-represented Defendants
HEARD: March 9, 2022
Endorsement
[1] The Plaintiff obtained a Judgment against the Defendant Calloo on a liquidated debt on March 27, 2015. In attempting to enforce this Judgment, the Plaintiff discovered that Calloo had transferred his interest in a property Municipally described as 190 Dufferin Hill Drive, Vaughan, Ontario, into the name of his wife, the Defendant Nessa Stephens. Prior to obtaining the Judgment, the property had been in joint names.
[2] The Plaintiff has never been able to obtain payment of the Judgement and now seeks to set aside the transaction between Calloo and Stephens as a fraudulent conveyance.
The Facts
[3] The Defendants Calloo and Stephens purchased the property on September 2, 2003 as joint tenants. The property was the subject of a mortgage which discloses that the Defendant Stephens was the spouse of the Defendant Calloo.
[4] On February 26, 2015, the Plaintiff served Calloo with a Plaintiff’s claim seeking judgment against him on the debt (“the first action”).
[5] Calloo did not respond to the claim in the first action. Rather than respond, Calloo contacted a lawyer who was retained to transfer Calloo’s joint interest in the property to Stephens. The transfer between Calloo and Stephens took place on March 2, 2015.
[6] On March 27, 2015, the Plaintiff obtained full judgment in the first action against Calloo and filed a writ against Calloo on April 21, 2015.
[7] On June 2, 2021, the Plaintiff commenced an action against Calloo and Stephens seeking damages in the amount of $35,000 for fraudulent conveyance, and a declaration that the conveyance of the property on March 2, 2015 is null and void and set aside.
[8] The statement of claim was properly served on the Defendants and no defence has been filed. The Defendants have been noted in default. As a consequence of the noting in default pursuant to Rule 19.02 of the Rules of Civil Procedure, the Defendants are deemed to admit the truth of all allegations of fact made in the statement of claim. Amongst the allegations of fact set forth in the statement of claim are the following:
On February 26, 2015, the Plaintiff served Calloo with a statement of claim, seeking judgment against him on a debt. Upon receipt of the claim Calloo spoke with Nessa Stephens about his concern that if the Plaintiff obtained judgment against him, the Plaintiff would be able to enforce the judgment against his joint interest in the home. The two defendants made an appointment with a lawyer, Dennis Tien-Yew Pao (“Mr. Pao”).
The Defendants attended at the office of Mr. Pao, and instructed him to prepare a transfer of Calloo’s joint interest in the home to Nessa Stephens. The Defendants neglected to mention to Mr. Pao that Calloo had just been sued and was attempting to hinder or delay his creditors by transferring his half of the home to his spouse.
On or about March 2, 2015, the Defendant Calloo transferred his interest in the Property to the Defendant, Nessa Stephens, his spouse, by way of deed registered as Instrument No. YR2262201 (the “Conveyance”). The end result of this Conveyance is that the Defendant, Nessa Stephens, is now the sole owner of the Property.
The Plaintiff states that the Defendant Calloo transferred the Property to his spouse for no or inadequate consideration for the sole or primary purpose of defeating, hindering or defrauding his creditors and in particular, the Plaintiff. The Plaintiff pleads and relies on the Fraudulent Conveyances Act, R.S.O. 1990, c. F29.
The Plaintiff states that the Conveyance was made when the Defendant, Calloo was insolvent or was on the eve of insolvency with intent to defeat, hinder, delay or prejudice his creditors including the Plaintiff. The Plaintiff relies on the provisions of the Assignments and Preferences Act, R.S.O. 1990, c. A.33.
In the alternative, the Plaintiff states that the Conveyance was made when the Defendant Calloo was on the eve of insolvency to his wife with intent to give her an unjust preference over other creditors. The Plaintiff pleads and relies on the Assignments and Preferences Act.
The Plaintiff further states that the Defendant, Nessa Stephens, was at all material times aware, or ought to have been aware, of her husband’s fraudulent intent in conveying his interest in the Property to her and was a willing participant in the fraudulent scheme.
The Law
[9] While there is often no direct proof of any intent to defeat, hinder or delay creditors, and while it is more common for there to be suspicious facts which are often referred to as “badges of fraud” as evidentiary indicators of fraudulent intent, in this case the Defendants have chosen not to defend this action and have been noted in default, and as such deemed to admit the facts reproduced from the statement of claim as quoted above.
[10] In the circumstances of this case, apart from the deemed admission the transfer of the property between the Defendants who were husband and wife and the timing of that transfer is particularly suspicious. As reflected in Jonas v. McConnell, 2014 ONSC 6000 at para. 56:
“The transfer of property to a person in a close relationship is, of course, itself a badge of fraud. In such cases the testimony of the parties as to their subjective intent must be scrutinized with care and suspicion, It is seldom that such evidence can be safely acted upon as in itself sufficient. In cases involving a transfer to near relatives, as a matter of prudence the court should most often require corroborative evidence of the bona fides of the transaction.”
[11] A similar view to that reflected in Jonas can be found in Bayerische Landesbank v. Seiber, 2015 ONSC 27, where the view expressed by the court at para. 94 is equally applicable to the facts of this quote:
One important badge of fraud…is a transaction with a family member.
[12] I am more than satisfied based on the deemed admissions and the suspicious nature of the transfer between the Defendants, that at a point in time when demand was being made for payment of the debt that not only was the transfer suspicious, it was done with the fraudulent intent to defeat, hinder or delay, or defraud creditors or others of their just and lawful actions contrary to the provisions of the Fraudulent Conveyances Act, R.S.O. 1990, c. F.29.
[13] The Plaintiff also seeks damages of $35,000 and has referred the court to a judgment dated December 15, 2021, in a case involving the Royal Bank of Canada and two defendants. Apart from the Judgment where $5,000 was awarded, there are no reasons given as to why those damages were awarded.
[14] In my view, if the Plaintiff in a case like this is seeking damages, there is an onus on the Plaintiff to prove those damages at large. The court has no evidence of such damages other than the non-payment of the debt. With the judgment that this court will now be issuing, restoring the property to its original title involving the Defendants, the Plaintiff may be in a position to realize on that debt.
[15] In the result, this court grants judgment declaring the deed registered between the Defendants dated March 2, 2015 as fraudulent and therefore null and void, and set aside with a further direction to the Master of the Land Registry Office for the Regional Municipality of York to restore title to the property to the names of the Defendants as joint tenants. I have signed the draft judgment in that regard.
[16] As for the question of costs, this court orders that the Defendants shall pay to the Plaintiff costs which I have fixed in the amount of $3,000 all inclusive.
M.L. Edwards, R.S.J.
Date: April 25, 2022